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​What the United States’ weakened embargo against Cuba means for Canadian business

Canadian exporters and importers should pay close attention to the ongoing changes in United States-Cuba relations. After more than five decades of animosity between the two countries, U.S. President Barack Obama and Cuban President Raúl Castro announced in December 2014 that relations would be gradually normalized. Significant changes have been implemented over the past year. The U.S. removed Cuba from its State Sponsors of Terrorism list, each country reopened its embassy in the other, and, perhaps most importantly for Canadian businesses, the U.S. relaxed its economic embargo measures against Cuba.

Nonetheless, important issues continue to face Canadians conducting business in Cuba. Normalization of U.S.-Cuba relations has not yet affected the 1996 Cuban Liberty and Democratic Solidarity (LIBERTAD) Act, also known as the Helms-Burton Act. As we discussed in our February 2013 Blakes Bulletin: Doing Business in Cuba: Understanding Canada’s Blocking Legislation, this U.S. legislation seeks to prohibit non-U.S. nationals from a wide swathe of economic transactions relating to expropriated Cuban property. Further complicating matters is the Canadian Foreign Extraterritorial Measures Act and its regulations, which prohibit compliance with the Helms-Burton Act and other U.S. extraterritorial embargo measures.

CUBA’S INCREASING ECONOMIC EXPOSURE TO THE U.S.

In January and September of 2015, and most recently on January 26, 2016, the U.S. administration announced substantial curtailment of the Cuban Assets Control Regulations (CACR) and Export Administration Regulations (EAR). The CACR and EAR are the primary tools through which the U.S. enforces its economic embargo against Cuba. All three sets of changes, which together have a far-reaching impact, have already taken effect.

A key change is that American travel to Cuba has been greatly eased. Until recently, Americans travelling to Cuba were required to obtain individual licences in one of 12 categories, including family visits, educational activities and journalistic activities. Travel within these categories is now authorized by general licence, rendering individual licence applications unnecessary. Close relatives can accompany travellers authorized under one of the 12 categories. Transactions ordinarily incidental to travel are now permitted, as is the use of U.S. credit and debit cards while in Cuba. The two countries have also agreed to resume direct, scheduled flights. To that end, entry into blocked space, code-sharing and leasing arrangements have been authorized to facilitate air carrier services. Americans in Cuba will now be a common sight.

The import and export of certain goods and services has become easier for U.S. companies. Certain consumer communications devices and hardware can now be exported without a licence. The same applies to personal computers, televisions and consumer software. Similarly, now permitted is the export of building materials for the construction of privately-owned buildings, tools and equipment for the private agricultural sector, and tools, equipment and supplies for use by private sector entrepreneurs. Telecommunications items improving communications to, from, and among the Cuban people are now generally approved for export, as are items ensuring civil aviation safety, including the export and re-export of such aircraft leased to state-owned enterprises. Items meeting certain needs of the Cuban people — such as infrastructure, food processing, and education — may be licensed for export on a case-by-case basis, even where export is to the Cuban state. Exports can now be purchased on an open account basis rather than by cash-in-advance.

U.S. financial institutions can provide new financial services within Cuba. They are now permitted to enrol Cuban merchants and process certain travel-related credit and debit card transactions. They can also provide financing for all authorized, non-agricultural exports from the U.S. and re-exports of 100 per cent U.S.-origin items from third countries to Cuba.

To some degree, the amendments to CACR and EAR diminish the effect of the embargo on Canadian businesses. U.S.-owned or -controlled entities may now provide certain goods and services to Cuban nationals outside of Cuba. Cuban nationals who have permanently relocated outside of Cuba may have their blocked accounts unblocked. Transactions pertaining to third-country conferences attended by Cuban nationals are now allowed. Third-country vessels participating in certain trade with Cuba may now enter the United States.

SIGNIFICANT BARRIERS TO DOING BUSINESS IN CUBA STILL EXIST

Despite these wide-ranging changes, important aspects of the U.S. embargo against Cuba remain in force. Restrictions continue on exporting goods and services to Cuba, apart from the new exceptions in the CACR and EAR. Full-scale removal of the embargo would require action from the U.S. Congress to amend or repeal theHelms-Burton Act.

Canadian businesses with existing or potential interest in trade with Cuba should note that far-reaching regulatory changes to the embargo are making commerce in Cuba a reality for U.S. entities. However, the interaction between Canadian and American legislation regarding trade with Cuba remains complex. As such, Canadians will need to remain careful to navigate accurately between the two legal regimes during this period of transition.